Your Charitable Gifting Guide

by | Nov 29, 2021 | Blog

Charitable gifting is donating wealth to a non-profit organization. The gift can be made as cash or other assets (appreciated stock). The purpose of charitable gifting is to help the organization of your choice. But, also, it can make sense from a tax perspective for both you and the charity.

The end of the year is usually when folks think about charitable gifting. Between the holidays and year end tax planning, this topic comes up a lot in November and December.

Whatever your reason for giving this year, it’s important to know how your charitable donations can impact your financial plan. In fact, being strategic and intentional in your 2021 charitable gifting can create tax benefits for both you and your chosen charity.

Here’s how.

Your Charitable Gifting Guide

Research Charitable Organizations

Maximize the impact your monetary donation can have by selecting reputable and transparent organizations. A qualified charity will have 501(c)(3) status, indicating it’s federally recognized as a non-profit organization.

Third-party websites like Charity NavigatorCharity Watch and Give Well offer unbiased, independent ratings and evaluations of charitable organizations. These sites can offer important insights into how money donated is distributed. If you’re considering making a sizeable donation, it may be helpful to speak directly with the chosen charity to discuss how the gift will be utilized.

If you haven’t already, check with your employer about what opportunities they provide in regards to charitable gifting. For example, some employers will match employee donations to certain organizations.

Consider Itemizing Your Deductions

We recently recorded an informative video that briefly goes over the important tax thresholds for gift giving.

To deduct charitable donations, you must itemize them on an IRS Schedule A form. To do this, you’ll need to keep track throughout the year of each donation made to a charitable organization. In most cases, the charity can provide you with a form to document your contribution. If the charity does not have such a form handy (and some do not), you may be able to use other forms of proof including:

  • Receipts
  • Credit or debit card statements
  • Bank statements
  • Canceled checks 

When reporting deductions, the IRS may want to know a few important details such as the name of the charity, the gifted amount and the date of your gift.

Remember, itemized deductions may only have tax benefits when they exceed the standard income tax deduction, so be sure to check on the standard deduction amount for your tax filing status.

Make Non-Cash Donations

Many charities welcome non-cash donations. In fact, donating an appreciated asset can be a tax-savvy move

For example, you may wish to explore a gift of highly appreciated securities. Selling securities can lead to a taxable event.

This transfer can accomplish three things:

  • You can manage paying the tax you would normally pay upon selling the shares.
  • You may be able to take a current-year tax deduction for the full fair market value of the shares.
  • The charity gets the full value of the shares, not their after-tax net value.

Charitable gifting is a complex topic and we are barley scratching the surface here in this blog post.

We see situations all the time where folks accumulate assets and then want to shed these assets later in life. But you can, and should think about gifting as part of your overall financial plan at all points throughout your life.

If charitable gifting is an important part of your financial plan, it’s important to make sure you’re getting the most out of each donation.

As always we want to recommend that you please speak with your tax preparer before making any final decisions on gifting. While we are well-versed in this area, we are not tax experts.

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